Thread: U.S. Housing

here you go Milkman http://www.speculativebubble.com/images/homevalues1.gif

Originally Posted by Milkman

I do notice the term "mortgage-slave"

It's also called "house poor"

Can't spend anything outside the house to make the payments

Short Selling is leaving some in a bind, as expected:

Link: WP: Some home sellers losing money - washingtonpost.com Highlights - MSNBC.com

Existing home sales tumble in March

Trade group: Biggest monthly slump in nearly two decades

Updated: 9:29 a.m. PT April 24, 2007

WASHINGTON - Sales of existing homes plunged in March by the largest amount in nearly two decades, reflecting bad weather and increasing problems in the subprime mortgage market, a real estate trade group reported Tuesday.

Entire: Existing home sales tumble in March - Real Estate - MSNBC.com

Home Sales Hit Slowest Pace in 4 Years
Monday June 25, 10:21 am ET
By Martin Crutsinger, AP Economics Writer
Sales of Existing Homes Fall in May to Lowest Level in Four Years
WASHINGTON (AP) -- Reflecting further housing troubles, sales of existing homes fell in May to the lowest level in four years while the median home price dropped for a record 10th consecutive month.

The National Association of Realtors reported Monday that sales of existing single-family homes and condominiums dropped by 0.3 percent to 5.99 million units in May, the slowest sales pace since June of 2003.

The median price of a home sold last month dropped to $223,700, down 2.1 percent from a year ago. It marked the 10th straight price decline compared with a year ago, the longest stretch of weakness on record.
The sales decline reflected weakness in the South, where sales dropped by 3.4 percent, and the West, where sales were down by 0.8 percent.
Sales actually showed strength in the Northeast, rising by 5.8 percent, and the Midwest, where they were up 0.7 percent.


In a troubling sign for the future, the inventory of unsold homes rose by 5 percent to 4.43 million units in May, a level that would take 8.9 months to clear out at the May sales pace. That is the highest inventory level since the last deep slump in housing in 1992.


Analysts said housing is being hurt currently by high inventories and the recent crisis in subprime mortgages, which has caused lenders to tighten their standards, making it harder for potential buyers to qualify for loans.
They said all of the housing troubles seem to be causing a crisis in confidence, making people delay decisions to buy homes.


"I think psychological factors are currently the biggest drag on the housing market, in addition to a disruption from tighter credit for subprime borrowers," said Lawrence Yun, senior economist with the Realtors.
"Household formation has slowed dramatically since late 2006, implying that many people are doubling-up. They're adding roommates are moving in with parents," he said.


The current slump in housing is the worst since the 1989-92 downturn. It is occurring after a prolonged boom that saw sales of new and existing homes set new records for five consecutive years.

Link & Entire: Home Sales Hit Slowest Pace in 4 Years: Financial News - Yahoo! Finance



Things are cyclical, but the hard part is trying to figure out when the BOTTOM has been reached.

Billions in subprime ARMs will be subject to higher payments.

NEW YORK (CNNMoney.com) -- More than two million subprime adjustable rate mortgages (ARMs) are poised to reset at much higher rates in coming months, worsening an already suffering housing market.

Borrowers who took out hybrid ARMs in 2004 and 2005 to secure low "teaser" rates for the first two or three years of the loan may see their monthly mortgage payments climb by35 percent or more.

Consumer groups and politicians worry that hundreds of thousands of subprime ARM borrowers will be unable to keep up with their mortgage payments and will lose their homes.

"In October alone more than $50 billion in ARMs will reset," according to Mark Zandi, chief economist and co-founder of Moody's Economy.com. That's a record, according to Zandi.

A buyer in 2005 with poor credit and limited means might have signed on for a $200,000 2/28 hybrid ARM, locking in a fixed rate of 4 percent for two years. After paying $955 a month, his bill would now be set to spike to $1,331, a 39 percent increase.

Until recently, rising home prices bailed out many ARM borrowers in trouble. They could raise cash with cash-out refinancings or home equity lines of credit. If worse came to worse, they could sell the house and get some money back.

But prices have stabilized or slipped in many markets.

Link: http://money.aol.com/cnnmoney/reales...l-coming-due/2

Well the Subprime is continuing and will continue for the next 2 years.

It's trickling over to Alt-A loans, hedge funds that bought bundled subprime mortgage securities, and is also affecting American consumer spending which the U.S. economy depends of for the 72% of it's GDP.

Sit back, and enjoy the train crash.

not looking good from the WSJ, and the ECB injected 100 billions to avoid a meltdown, not seen since 911

FALLOUT INTENSIFIED world-wide from the mortgage crisis. BNP Paribas froze three funds, battered hedge funds sold assets, and Countrywide Financial said "unprecedented" disruptions could damage its financial position. 12:26 a.m.
• Page One: How Subprime Mess Ensnared German Bank
• Map: Global Blowups | Scorecard | Complete Coverage

From WSJ

The SEC is checking the books at Wall Street firms, including Goldman, Bear Stearns and Merrill, to make sure they aren't hiding subprime-mortgage losses. 12:05 a.m.

The Dow industrials plunged 387.18 to 13270.68, their second-worst day of the year. Corporate-bond markets were roiled. Global central banks appear unlikely to cut interest rates, despite moves to pump liquidity into the financial system. 12:23 a.m.
• Tokyo's Nikkei 225 Sinks 2.6% | Markets data | Fed futures
• Video: Hilsenrath, Wessel on the moves | Economists' take
• Vote: What should be the Fed's next move on rates?

Turmoil in credit markets will have just a minor impact on growth, most economists say. But they cut their economic forecasts and nearly a third expect higher borrowing costs to be a significant contributor to a slowdown, in the latest WSJ.com survey.
• Hedge Funds, Housing, More: Charts, download data
• Econ Blog: The Populist Economists?
• Video: Miller Tabak's Tony Crescenzi on the credit crunch

Another article. I put this up here because a new breed of mortgages are being defaulted on. And there is much more damage to come. Some briefs snippets below.

High-risk mortgages turning into toxic mess

Experts believe the biggest problems will emerge during next 16 months


....If the worst fears about these loans materialize, the economic damage would likely extend well beyond the United States because much of the debt has been packaged into securities sold to pension funds, banks and other investors around the world who were hungry for high yields. The fallout could also further depress housing prices, leaving U.S. consumers feeling poorer and less likely to buy the merchandise imported from overseas.

While most of the mortgage market worries so far have focused on the huge losses flowing from the subprime home loans made to people with bad credit, the option and interest-only ARMs held by more creditworthy borrowers loom as another calamity in the making.

“Those loans are begging to blow up. This is a true financial crisis,” said Christopher Thornberg, a principal with Beacon Economics, a consulting firm that has followed real estate market’s ups and downs.

Entire: Risky mortgages turning into toxic mess - Real Estate - MSNBC.com

We know where Krugman stand in his Op-Eds but apparently Greenspan was lobbied to focus on the subprime lending as far back as the year 2000. Interestingly, in his book, Greenspan claims he never saw the housing fiasco coming. Is he this naiive and foolish, or is he lying?

Entire Article: A Catastrophe Foretold - New York Times

I am not a gloom and doomer when it comes to the U.S. economy, but in the next 2 years there will be some adjustments. Some people will be affected; some people will not be.

Data add to gloom on US economy

By Francesco Guerrera, Jonathan Birchall and Daniel Pimlott in New York
Published: October 30 2007 15:32 | Last updated: October 30 2007 23:05

A build-up of bearish data fuelled fears of a US economic slowdown on Tuesday as consumer confidence slumped to a two-year low and house prices in big cities suffered their biggest drop in 16 years.


The growing evidence that the credit squeeze and housing meltdown are spreading to the rest of the domestic economy will increase pressure on the Federal Reserve to set aside concerns over rising inflation and cut interest rates on Wednesday.

Link: FT.com / World - Data add to gloom on US economy

Couple Dead Serious About Selling House

3 days ago
WEXFORD, Pa. (AP) — It could be the deal of a lifetime. A Pittsburgh-area couple, Bob and Ricki Husick, are offering anyone who buys their home full cash-back upon their death and even their full inheritance, currently worth at least $500,000.

The Husicks have been trying to sell their home for almost a year, but have failed to do so in the current shaky market.

Bob Husick said he's asking $399,900 for the four-bedroom, three and a half bath home about 20 miles north of Pittsburgh.

According to the Husicks' offer, the buyer would get the money back when the couple dies. And if the buyer agrees to care for them in old age, they could also inherit their retirement home in Arizona, bringing the estate's current value to about $500,000.

The Associated Press: Couple Dead Serious About Selling House

A retirement home in Arizona for $101,000? Not bad!

Very relevant article. HELOCS and Home Equity Loans

Homeowners Feel the Pinch of Lost Equity
By PETER S. GOODMAN
November 8, 2007

RENO, Nev., Nov. 5 — As his wedding day approached last spring, Marshall Whittey found that his money could not keep pace with the grandiosity of his plans. But rather than scale back, he chose instead, like millions of homeowners across the country, to borrow against the soaring value of his home.

Marilyn Newton for The New York Times
Marshall Whittey of Reno, Nev., found that his home is worth less than it was a year ago and he cannot borrow against the equity.

Multimedia

Graphic No More Piggy Bank at Home



Related

Times Topics: Mortgages and the Markets


He and his bride, Holly Whittey, exchanged vows on the grounds of a sumptuous private estate in the Napa Valley. They spent their honeymoon at a resort in Tahiti.


But now, in an ominous portent for the national economy, Mr. Whittey has grown tight with his money. His home is worth far less than it was a year ago, and his equity has evaporated. And like many other involuntary adopters of a newly economical lifestyle, he can borrow no more.

“It used to be that if I wanted it, I’d just go and buy it and finance it,” Mr. Whittey, 33, said. “I’m feeling the crunch, and my spending is down significantly.”


The Whitteys and others like them are at the center of deepening worries that the economy is headed for a substantial slowdown, possibly even a recession, as the artery of cash from Americans borrowing against the value of their homes has sharply narrowed.


“Everybody was basically using their house as an A.T.M. machine,” said Dave Simonsen, a senior vice president for NAI Alliance, an industrial real estate firm in Reno. “Now they are upside down on their house without that piggy bank to go back to.”


From 2004 through 2006, Americans pulled about $840 billion a year out of residential real estate, via sales, home equity lines of credit and refinanced mortgages, according to data presented in an updated working paper by James Kennedy, an economist, and Alan Greenspan, the former Federal Reserve chairman. These so-called home equity withdrawals financed as much as $310 billion a year in personal consumption from 2004 to 2006, according to the data.


But in the first half of this year, equity withdrawals were down 15 percent nationally compared with the average for the last three years, and consumption supported by such funds plunged nearly one-fourth, according to the Kennedy and Greenspan data.


This summer, the size of withdrawals fell even more sharply to about one-third below the level of late last year, according to Mark Zandi, chief economist at Moody’s Economy.com.


“This slide in equity withdrawal is very recent,” Mr. Zandi said, “so you wouldn’t expect the drop in spending to occur until now, or Christmas.”
Only a year ago, money taken out of houses was still more than 9 percent of the nation’s disposable income, Mr. Zandi calculated, using a sampling of Equifax credit reports to supplement Fed data. By this fall, it had dropped to about 5 percent, a difference of about $350 billion a year.


Much of the attention in the recent collapse of the housing boom has focused on those in danger of losing their home or facing higher monthly payments in their adjustable mortgages. But the broader effect on the economy is likely to come from the much larger group of homeowners who can no longer count on rising home values to bolster their wealth.
Consumer spending accounts for about 70 percent of all economic activity in the United States, or about $9.8 trillion, so even a slight dip in home borrowing takes huge amounts of money out of the flow. The prospect of a slowdown, combined with the squeeze on households from higher oil costs, is sending shivers through the retail world, as apparel merchants, furniture dealers and electronics stores brace for the possibility that the

all-important holiday shopping season will disappoint. Automakers are bemoaning sluggish sales.


“A fall of 2 percent in consumption would be big enough to trigger a recession,” said Christian Menegatti, lead analyst for RGE Monitor, a consulting firm in New York.

Homeowners Feel the Pinch of Lost Equity - New York Times

Alan Greenspan just announced that the sub prime housing collapse was a "shocker" and that "no-one expected it"

What a cnut!

Ive been working with the US stock exchange for under a year. One of the first things I learned was that the US had been giving mortages to anybody that could put a thumb print on the application form. It was clear that major trouble was coming. Even to a total novice like me, I did a bit of research by googling "liar loans" which gives over half a million results.

So is this Greenspan a prick, or am I being hasty with my conclusions?

Edit: sorry forgot the link to his "observations'

Bloomberg.com: Worldwide

Yeh, you always pay for soft money.

Sub-Prime fallout will affect all of us wherever we are situated in the world today.

This is not just a US issue.

^ its "Made In The USA" though

^Yes, made in the USA, exported to every country and economy in the world. Welcome to globalisation.

^ yes greed and blind stupidity are a global problem.

At least there are a few cheap stocks kicking around, thats if anyone has any money left.

The reason it's global is so many banks around the world tried to buy into the feeding frenzy to make a few yen/pesos/pounds/euros, etc.

In 05-06 I saw young kids in LA with modest incomes buying 800,000 homes. I knew something was badly maligned. I lived in Tokyo when that economic bubble burst, largely because of grossly inflated land prices. Unsustainable is how I described it to friends and co-workers -- they didn't share my opinion. I rented for a year and finally moved. When I left about a third of the homes in my neighborhood (Redondo Beach) had for-sale signs in their yards. Just like world stock markets, there are always corrections, slowdowns and recessions.

Why does the world always seem surprised when one happens?

I'm no Alan Greenspan, but I saw it.

This great article spells it all out nicely in plain language....

BBC NEWS | The Reporters | Robert Peston

Nice article. Everyone's to blame.
The homeowner who fudged his income
The mortgage lender whose commission was higher because he sold a mortgage the homwowner couldn't afford
The mortgage company and the big banks that don't seem to know how much bad debt they're carrying and then roll it into shit bonds
Foreign banks that keep the ball rolling 90 days at a time